What the Holidays mean for Supply Chain Risks in 2020
The holiday season has always been stressful on supply chains, but that stress has for the most part been predictable — increased retail visitors, higher demand for consumer goods, larger crowds in airports, and spikes in purchases of unusual products like Christmas trees are all par for the course. But 2020 has shown us that nothing can be taken for granted this year, and businesses should be prepared to extend that logic to the holidays. Here are three predictions from Stimulus about what to expect from this unusual, pandemic-beset holiday season:
1) Its going to be a long one
We’ve all heard the complaints — or made them ourselves — about Christmas season coming earlier every year, but this time it’s actually true. Nearly half of US consumers have already begun their holiday shopping, no doubt in part due to the widespread embrace of online purchases during pandemic mitigation restrictions. Amazon Prime Day’s late date this year on October 13th was another factor, becoming a new starting pistol for this year’s holiday promotions.
2) Shipping will have last-mile problems
While we’ll all be tired of Mariah Carey by the end of it, the stretched-out season may actually be a saving grace for shipping providers. Consumers have high expectations for on-time delivery thanks to Amazon’s outstanding performance in that area, but transportation providers have now spent most of 2020 adapting their operations to a high volume of home orders. With the holiday demand being teased out over multiple months, shippers may see sustained raised demand for their services rather than a December spike, allowing them to maintain higher performance throughout. Where problems will arise will be in the last-mile areas of their networks, where projections indicate that capacity may be exceeded by up to 5%. Many brands can alleviate this by using their physical locations as pick-up centers, and companies that don’t have a brick-and-mortar presence should consider partnering with those that do for this purpose. Gig apps like Uber or Roadie offer the potential to provide a significant amount of flexible last-mile capacity, which may also help with this final link in the supply chain.
3) B2B spending endures, but dangerous waters are ahead
Holiday discussions tend to skew towards consumer-oriented industries for obvious reasons, but the implications for this year extend into the B2B realm as well. So far the effects of COVID-19 containment efforts have been most sharply felt by consumer-oriented businesses that rely on household discretionary spending. Luckily for the B2B environment, during this recession the US Gross Output has moved in tandem with the GDP unlike in previous recessions, where the Gross Output losses were two or three times that of GDP (for those unfamiliar with Gross Output, it is a measure of total spending at all stages of the supply chain, while GDP measures only finished goods and services).
This means that underneath all of the COVID-19 disruptions, the economy we remember from 2019 remains relatively intact — at least for now. There are worrying indications that the longer the current situation endures, the more we risk transitioning from a pandemic recession to a traditional recession that will take much longer to recover from. The upcoming holiday season has a risk of magnifying the spread of COVID-19 through family gatherings and travel, which would only complicate any possibility of containment in the near future. This could only be addressed by dramatic, coordinated action, something that the incoming administration is apparently considering.
Archer Smith, Supply Chain Associate / the Stimulus Team